Mall,

I do not know the details of the equine insurance market but as a shareholder of Berkshire Hathaway for the last 18 years (and a bunch of other insurance companies over the years) I do understand the cyclical nature of the business and how capital flowing in and out changes pricing and returns on capital etc... I am quite certain that the value of the item being insured is almost always a major component of the price of the insurance - generally much more so than the cyclical ups an downs and other factors.

This is not the forum to discuss it further, but as an avid insurance investor if you are correct in saying that capital has been flowing out of the industry, I might be interested in making an investment. Capital flight is usually accompanied by increased profitability from the remaining players soon after - as they are free to raise prices to levels that generate adequate returns on investment. If you have any information that could shorten my reseach path, please let me know. A few company names would help - especially if they specialize.

I understand and agree with you points about the Japanese and Arabs. From what I can see here in the US, the prices being paid for yearlings that are racing here still don't make economic sense for our owners.

If US buyers of yearlings are losing massive sums of money in aggregate, they will eventually be forced to drop out or they will come to their senses.
That may leave the Japanese with their higher purse structures and Arabs with unlimited capital and economic stupidity to bid on the yearlings. I would think that Americans dropping out at the margins would still work towards lowering prices. However, if the Japanese purses are supporting these yearling prices and their owners are doing well, IMO US racing is in very deep doodoo - even worse than I thought.

It's difficult for me to imagine an industry in which owners are hemorrhaging red ink (as they are in the US) being successful over the long haul. There are two simple paths to better results for owners. Lower prices for the horses or higher purses for doing well. The problem is what I stated. When the prices for horses are high, the pressure to retire succesful horses early is high. That works in the direction of reducing fan interest and growth, potential handle and purse growth etc...

It's obviously not a healthy situation when so many players within an industry are losing money except for a handful of lottery winners. Speculative prices that are not supported by income streams usually lead to heavy losses and that usually leads to a major bust in prices.














Edited 4 time(s). Last edit at 06/16/2005 09:09AM by classhandicapper.